A much-talked-about IPO by an Indian tech unicorn is finally all set to arrive.
On July 8, restaurant discovery and food delivery firm Zomato said it would launch its initial public offering on July 14. The Gurugram-based company is looking to raise Rs 9,375 crore through the IPO, where it will offer shares at a price between Rs 72 and Rs 76 apiece, it said in its press conference. Zomato’s IPO plan was approved by the Securities and Exchange Board of India on July 5.
“We will utilise the IPO proceedings for funding organic and inorganic growth initiatives, and for general corporate purposes,” Zomato’s chief financial officer Akshant Goyal said.
In the year that ended on March 31, 2020, Zomato’s revenue increased nearly 50% to Rs 2,604.7 crore. The company’s revenue grew strongly during the pandemic as Indians remained indoors and many restaurants remained closed for long periods during the lockdown, the company management said.
In the nine months that ended on December 2020, Zomato had clocked a revenue of Rs 1,367 crore. The company has not yet announced the full-year revenue for the fiscal year 2021.
But despite the strong growth in revenue, Zomato continues to be a loss-making firm. Between March and December 2020, the company booked losses of Rs 682 crore. The company’s management has not shared any timeline for profitability. “We cannot give any forward-looking statement,” Zomato chief operating officer Gaurav Gupta said. “Not that we know when it will happen.”
Zomato’s IPO planning
Since the start of this year, the food-delivery giant has been in a funding-raising mode as part of its pre-IPO plans.
In February, it raised $250 million at a valuation of $5.4 billion from investors like Fidelity, Kora Management, Tiger Global, Dragoneer, and Bow Wave. Since last year, the company has raised over $2 billion. A majority of these investments came during the start of the pandemic in India in March 2020.
Zomato’s CEO Deepinder Goyal in March this year has said he expects his company to be worth as much as $50 billion in five years. Experts believe that given the stronghold of the company this wouldn’t be a difficult task. As of now, the company has a presence in over 500 cities and 23 countries, including the United States.
Even though the second wave of Covid-19 in India was far more fatal and devastating, Zomato’s business did not face many challenges, chief operating officer Gupta said.
“There has not been any effect on food orders in comparison with the first wave,” he said. “People have now understood that food delivery is safe. There has not been a single case of transmission through food delivery at Zomato.”
In March, Zomato had told Quartz that a stringent focus on safety and hygiene had translated into the platform doing “120% of pre-Covid GMV [gross merchandise value] with steady week-on-week growth in order volume”.
Amazon’s food delivery
Zomato currently has one close rival: Bengaluru-headquartered Swiggy. However, the food delivery segment in India has caught the interest of many new players, including American e-commerce giant Amazon, which entered the sector last year. While many view this move by Amazon as a potential threat for Zomato, Gupta said “food delivery is a large market and a fragmented one. And it will always have a space for healthy competition”.
The other immediate challenge for Zomato is the ongoing tussle between restaurant owners and food delivery platforms in the country. The National Restaurants Association of India has approached the country’s competition watchdog over alleged violation of laws by Swiggy and Zomato. The association has said that the firms are charging “exorbitant commissions” from restaurants and “masking” customer data from them.
Zomato said it cannot do anything to address the concerns as of now as it has not received an official complaint yet. As of December 31, Zomato had 3,50,174 active restaurant listings on its app and website.
This article first appeared on Quartz.